IOLTA Guidelines for Financial Institutions

1 IOLTA Guidelines for Financial Institutions December 2014 Texas Access to Justice Foundation (512) 320-0099 TABLE OF CONTENTS Introduction .. 3 History of IOLTA .. 4 Financial Institution 4 Prime Partner Program .. 5 Financial Institution Rate 6 How to Open IOLTA Accounts .. 6 Operational 7 Basic Account Information .. 7 Tax Identification Number ( TIN ) .. 7 Fees and Service Charges .. 8 Allowable Expenses .. 8 Expenses That Are Not Allowed .. 8 Negative Netting is Prohibited .. 9 FDIC Protection .. 9 IOLTA Remittance .. 10 Completing the IOLTA Remittance Report Form .. 10 Account Errors .. 13 Financial Institution Mergers .. 13 Frequently Asked Questions .. 13 TAJF Contact Information .. 15 IOLTA Notice to Financial Institution and Foundation Form & IOLTA Bank Account Closure IOLTA Remittance Report Form & Page 3 Introduction The Texas Access to Justice Foundation ( TAJF ), is grateful to more than 460 Financial Institutions in Texas that have partnered with TAJF for the success that has been generated by the Interest On Lawyers Trust Accounts ( IOLTA ) program.

2 The IOLTA program, administered by TAJF, provides Financial resources to assist in delivering civil legal services for low-income Texans. These Guidelines for Financial Institutions provide details about IOLTA accounts for you to share with colleagues at your Financial institution. The Guidelines include the following information: Financial institution eligibility Changes for submitting IOLTA reports Instructions on how to prepare the IOLTA Remittance Reports Forms to be distributed to colleagues at your Financial institution Information that includes a link to TAJF s rules and TAJF contact information Types of accounts used for IOLTA deposits Frequently Asked Questions ( FAQs ) Attorneys may only place their IOLTA accounts at eligible Financial Institutions .

3 TAJF makes the determination as to whether a Financial institution is an eligible institution. Financial Institutions (banks, savings & loan associations, credit unions) must contact TAJF prior to opening any IOLTA accounts. A TAJF staff member will provide the Financial institution with documents that must be completed and submitted to TAJF. After reviewing the documents, TAJF will contact the Financial institution with approval or an explanation as to why approval was not granted. Please make copies of these Guidelines and provide them to your colleagues. Should you have any questions, contact the TAJF staff (contact information may be found on page 15). Page 4 History of IOLTA IOLTA programs originated in Australia and Canada during the 1960s.

4 IOLTA programs have existed and have been administered in all fifty states and the District of Columbia since 1995. In 1984, the Supreme Court of Texas created TAJF to administer the IOLTA program in Texas. Below is a link to TAJF s Governing Rules: Effective July 1, 1989, all Texas attorneys and law firms receiving short-term and/or nominal client funds must place those funds in interest-bearing trust accounts with the interest payable directly to TAJF. The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation ( FDIC ) and the Federal Home Loan Bank Board approve of the Texas IOLTA program. The Internal Revenue Service ( IRS ) has also made a final ruling that TAJF is a 501(c)(3) non-profit corporation and a 509(a)(1) publicly supported foundation.

5 Financial Institution Eligibility In 2009, the Supreme Court of Texas amended the Rules Governing the Operation of the Texas Access to Justice Foundation. These changes require that attorneys may only place their IOLTA accounts at eligible Institutions , which are those that pay no less on IOLTA accounts than the highest interest rate or dividend paid to non- IOLTA customers when IOLTA accounts meet or exceed the same minimum balance or other eligibility qualifications of non- IOLTA accounts. A Financial institution may offer any one of the following in order to comply with the rules: 1) The eligible institution may establish the IOLTA account as a qualifying higher rate product, including tiered interest rate checking accounts and a checking account with an automated sweep account that provides a mechanism for the overnight investment of balances in the IOLTA account in an interest-bearing or dividend-bearing account that is a daily Financial institution repurchase agreement or a money-market fund.

6 2) An eligible institution may choose to pay the higher interest or dividend rate on an IOLTA checking account in lieu of establishing it as a qualifying higher rate product. Page 5 3) An eligible institution may choose to pay a rate equal to the greater of or 65% (the index ) of the federal funds target rate (the benchmark ) as of the first business day of the IOLTA remitting period, which rate is deemed to be net of allowable reasonable fees, on an IOLTA checking account. The index and benchmark are determined periodically, but not more frequently than every six months, by the Foundation to reflect an overall comparable rate for the Texas IOLTA Program. When applicable, the Foundation will express its benchmark in relation to the Federal Funds Target Rate. 4) A yield specified by the Foundation, if the Foundation so chooses, which is agreed to by the Financial institution.

7 The qualifying yield would be in effect for and remain unchanged during a period of no more than twelve months from the inception of the agreement between the Financial institution and the Foundation. A Financial institution may pay a higher interest rate or dividend than described above. Interest and dividends shall be calculated in accordance with the Financial institution s standard practices for non- IOLTA customers. Prime Partner Program Many Financial Institutions have reinforced their commitment to funding civil legal services for low-income Texans by becoming PPrriimmee PPaarrttnneerrss. These PPrriimmee PPaarrttnneerrss have committed to pay an interest rate, net of allowable reasonable fees, the higher of 1) or more of the Fed Funds Target Rate; or 2) a minimum of on all IOLTA accounts.

8 Benefits of Becoming a PPrriimmee PPaarrttnneerr Business development: Lawyers may open IOLTAs where they have personal accounts Direct promotion of PPrriimmee PPaarrttnneerrss to the legal community throughout Texas Extend a Financial institution s brand by marketing the PPrriimmee PPaarrttnneerr status Emphasize the Financial institution s commitment to be a good corporate citizen in Texas Statewide recognition of PPrriimmee PPaarrttnneerrss in various publications and venues PPrriimmee PPaarrttnneerr certificate for Financial Institutions TAJF makes every effort to publicly promote its PPrriimmee PPaarrttnneerrss by including them in articles in law-related publications, business publications and press releases. Additionally, the PPrriimmee PPaarrttnneerrss are highlighted prominently on TAJF s website.

9 Please contact the Foundation s staff to learn more about how your Financial institution can become a PPrriimmee PPaarrttnneerr. Contact information can be found on page 15 of this Guidebook. Page 6 Financial Institution Rate Changes A Financial institution which wants to make a change in the interest rate being paid on IOLTAs must fill out the IOLTA Rate Comparability Information Form and submit it to the Texas Access to Justice Foundation for determination of eligibility. The Foundation will review the proposed changes in interest rates, and notify the Financial institution when approved. After approval, the new interest rate will take effect on the 1st day of the next calendar quarter: January 1st, April 1st, July 1st, October 1st. How to Open IOLTA Accounts Employees of Financial Institutions should follow these procedures when opening a new IOLTA account: 1.

10 All IOLTA accounts should be established in the name of the attorney or law firm, using their address not the Foundation address and should be interest-bearing trust accounts. 2. Complete the IOLTA Notice to Financial Institution form (located at the back of the Guidebook) with all of the required information. Fax the form to 512-469-0112 or mail the form to the address on the form (not the lockbox address). 3. Use TAJF s TIN, 74-2354575, for the IOLTA account do not use the attorney s or law firm s TIN or Social Security number. 4. IOLTA accounts can be set up in any one of the following Financial products: Business checking account (interest-bearing) Sweep account Negotiable Order of Withdrawal ( NOW ) accounts 5. Inform the attorney of the following information: Interest will be paid directly to TAJF, not to the attorney nor to the attorney s client(s).